Exam 7: Introduction to Budgets and Preparing the Master Budget

Budgetary slack helps buffer managers from budget cuts imposed by higher-level management.

In a master budget,the schedule of cash disbursements for purchases of inventory is used to prepare the ________.

Potential problems that can limit the benefits of budgeting do NOT include ________.

The first step in preparing the master budget is the ________.

On the cash budget,how do we obtain the available cash balance?

In practice,when developing a budget,two extremes used for guidance are ________ and ________.

Which of the following statements about long-range plans is FALSE?

Donald Company has the following information: Cash Balance, May 31 \4 5,000 Dividends paid in June 12,000 Cash paid for operating expenses in June 36,800 Equipment depreciation expense in June 4,500 Patent amortization expense in June 2,000 Cash collections on sales in June 99,000 Merchandise purchases paid in June 56,200 Purchase equipment for cash in June 17,500 Donald Company wants to keep a minimum cash balance of $10,000.Assume that borrowing occurs at the beginning of the month and repayments occur at the end of the month.Interest of 1% is paid in cash at the end of each month when debt is outstanding.Borrowing and repayments are carried out in multiples of $1,000. Required: Prepare a cash budget for June.

Which of the following is NOT a component of the operating budget?

Financial planning models enable managers to get answers to "what-if" questions.

A manager has several forecasts of sales corresponding to different levels of advertising.The manager decides to implement $1 million of advertising in the next fiscal year.At this level of advertising,the manager uses the ________ in the ________.

What is the sequence of steps(order of preparation)for the operating budget?

Audrey Company has the following data: Month Budgeted Sales May \ 46,000 June 50,000 July 52,000 August 48,000 The cost of goods sold percentage is 65% of sales and the desired ending inventory is 25% of next month's sales at cost.What are the total purchases budgeted for July?

Dooley Company has prepared the following sales budget: Month Cash Sales Credit Sales September \ 123,000 \ 210,000 October 140,000 200,000 November 167,000 260,000 December 189,000 190,000 Collections of credit sales are 50% in the month of sale,40% in the month following sale,and 10% two months following sale.No uncollectible accounts are expected.What are the estimated cash collections in October from October sales?

Potter Company's expected sales for April are $29,000.Other information follows: Budgeted Operating Expenses Amount Wages \ 4,000 Advertising 1,680 Depreciation 1,440 Rent 2,560 Promotion 5\% of sales All cash expenses are paid as incurred.What are the expected total cash disbursements for operating expenses for April?

Which budget is used to develop the schedule of cash disbursements for operating expenses?

Donnie Company has the following information: Month Budgeted Sales January \ 80,000 February 85,000 March 92,000 April 79,000 Budgeted Operating Expenses Per Month Wages \ 15,000 Advertising 12,000 Depreciation 3,000 Other expenses 4\% of sales All cash expenses are paid as incurred.What are the total operating expenses budgeted for the month of January?

No matter how many technical experts a company uses in forecasting,the sales budget should ultimately be the responsibility of the ________.

Cornell Company is preparing a cash budget for the month of June.The following information is available: Cash Balance, May 31, 2014 \ 11,000 Cash collections from customers in June 43,000 Cash paid for land in June 10,000 Patent amortization expense in June 5,000 Cash paid for merchandise in June 20,000 Cash paid for operating expenses in June 20,000 Cash dividend paid in June 5,000 The minimum cash balance desired is $5,000.What is the deficiency of cash before financing at June 30,2014?

The operating budget is a better measure of a company's long-term performance than the financial budget.